Can Credit Card Companies Garnish Your Bank Account?

Credit card companies cannot directly garnish a bank account without first obtaining a specific legal order.

The Creditor’s Legal Action

Credit card debt is typically unsecured, meaning it is not tied to a specific asset that a creditor can immediately seize. For a credit card company to access funds in a debtor’s bank account, they must first pursue legal action and obtain a court judgment. This judgment confirms the debt and allows collection efforts.

The legal process begins with the creditor filing a lawsuit against the debtor for the unpaid balance. This involves drafting a formal complaint and serving it, along with a summons, to the debtor. This service of process notifies the debtor of the lawsuit.

Upon receiving the summons and complaint, the debtor has a limited timeframe, typically between 20 to 30 days, to respond to the lawsuit. Ignoring the legal action can lead to a default judgment against the debtor. A default judgment occurs when the debtor fails to answer the complaint, losing the opportunity to dispute the debt or present a defense.

If the debtor responds, the case may proceed to discovery, where both parties exchange evidence, or the creditor might file a motion for summary judgment. A summary judgment can be granted if the court determines there are no material facts in dispute and the creditor is entitled to judgment as a matter of law. Otherwise, the case may go to trial, where the credit card company must prove the debt is owed.

Once a judgment is obtained, either through default, summary judgment, or a court ruling after a trial or settlement, the creditor becomes a judgment creditor. This status is a prerequisite for pursuing enforcement actions, such as bank account garnishment. The judgment typically includes the principal debt, accumulated interest, and court costs.

How Bank Account Garnishment Works

Bank account garnishment is a legal procedure allowing a judgment creditor to seize funds directly from a debtor’s bank account. The process targets money already held in the debtor’s financial accounts, including checking, savings, and other financial accounts.

To initiate a garnishment, the judgment creditor obtains a writ of garnishment. This writ is then formally served on the debtor’s bank. Upon receiving this legal order, the bank is generally required to freeze funds in the debtor’s account up to the amount specified in the judgment.

The bank’s role involves complying with the garnishment order by freezing the specified funds. During this period, the debtor’s access to the money is restricted. The bank is usually obligated to notify the debtor of the garnishment and, after a waiting period, releases the non-exempt funds to the creditor to satisfy the judgment.

The timeline for funds transfer can vary. Once finalized, the bank delivers the funds to the sheriff or court, who then forwards the money to the creditor.

Funds Protected from Garnishment

Even with a valid court judgment, not all funds in a bank account are subject to garnishment. Both federal and state laws provide protections, known as exemptions, for certain types of income and assets. These exemptions aim to prevent debtors from being left without essential means for living expenses.

Federal law specifically protects several types of benefits from garnishment. These include Social Security benefits, Supplemental Security Income (SSI), Veterans Affairs (VA) benefits, federal student aid disbursements, and certain federal retirement benefits like those from the Railroad Retirement Board or Civil Service Retirement System. These funds are generally protected even if mixed with other money in the account.

Many states also have additional exemptions beyond federal protections. These can include a certain amount of wages, specific types of property, or a “wildcard” exemption that can be applied to any property up to a specified monetary limit. State laws vary significantly, so the exact protections depend on the jurisdiction where the garnishment occurs.

To benefit from these protections, a debtor typically needs to take action by filing a claim of exemption with the court. This formal claim informs the court and the creditor that certain funds are protected by law. Debtors usually have a limited time from receiving notice of garnishment to file this claim and provide documentation proving the funds’ exempt status.